The food industry has entered a time of upheaval not seen since Wal-Mart Stores entered the grocery business more than 25 years ago, and adjusting to this new reality will challenge retailers and marketers to learn new skills and think about the business in fundamentally different ways, according to a presentation Tuesday at Western Michigan University’s Food Marketing Conference in Grand Rapids, Mich.
Bryan Gildenberg, chief knowledge officer of Kantar Retail, argued that a myriad of changes — sparked by a variety of developments ranging from new store formats to technology — is radically changing the way consumers decide what they buy, where they buy it, and how much they will spend. “Growth is going to be harder to come by,” he predicted. “You’re going to have to get good at more stuff.
“It’s not just e-commerce, it’s not just Aldi and Lidl, but the variety of footprints through which food is sold are all changing,” Gildenberg added. “Those changes are going to put an enormous amount of pressure not just on the formats themselves, but on the core formats that have always sold food. Those formats are going to have to retool, re-engineer and figure out what they’re going to do.”
Consumer decisions about where they shop are increasingly influenced by convenience and targeted by specialty banners designed around such trips, often blunting the advantages of so-called “one-stop shops.” Stores should focus on providing solutions to learn to accommodate such shoppers, he said.
“If it’s 6:30 and you’re hungry, and looking for something to bring home for your family, a deeply immersive center store experience is not what you’re looking for,” Gildenberg remarked. “The other challenge is that boxes are going up specifically designed for these occasions more distinctly and discretely.
“You’re really in the business of selling shoppers solutions, and the solution is something that saves them time,” he added. “Sometimes that’s about creating a really great, wonderful experience and sometimes that’s about getting them out the door as quickly as humanly possible.”
Club stores, discount stores and online retailers will grow about twice as fast as supermarkets, mass retailers and drugstores (excluding prescriptions) through 2020, while divisions will deepen between stores that serve dense urban areas and those serving suburban and rural communities.
“You’ll increasingly see that retail in densely populated areas will look really different from retail in non-densely populated ones, so you’ll need to get good at both,” he said. “The ability to connect through the independent stores in urban areas may become as important as the ability to sell at Kroger, Safeway and Albertsons.”
Projected growth is even less kind to supercenters, which should grow even more slowly than the rest of food retail through 2020. “If you’re a consumer packaged goods company this should fundamentally change how you plan the world,” he said. “For most of the 21st century and the last part of the 20th, I could make my growth plan as a company if I got Walmart right and hoped everything else broke even.”
Today’s shoppers are also increasingly shifting spending toward services over goods, and by 2020, are expected to spend $2 on service for every $1 on goods. This favors experiences like restaurants and reflects a shopper putting a premium on purchases that they feel support and reflect their lifestyle.
Technology in the meantime is radically changing how retailers and marketers need to approach interacting with shoppers. Gildenberg said brands should consider a customer-relationship management approach as demonstrated by Internet-assisted subscription services like Dollar Shave Club.
Marketers need to think over the implications of things like search and how it has evolved, he added. Voice-controlled search — now the origin of about 50% of all Google searches, he noted — tends to limit results when results are returned by voice. Search results are already redefining categories, Gildenberg added, by shifting them from product or retail defined groups.
“Almost every marketing touchpoint is going to need to be blended with what I’ll call activation opportunities — how do I take an interested customer and make sure they buy,” he said. “It wouldn’t surprise me if in 10 years from now you don’t have a VP of sales and a VP of marketing, but have a VP of converting.”
How much shoppers spend is also being upended by technology, Gildenberg said, citing a decline in the effectiveness of traditional promotions, a struggle among marketers to make effective use of mobile marketing, and the beginnings of a potential revolution in online basket algorithms such as those used by Jet.com.
“Companies are desperate to figure out mobile promotions,” he asserted, and need to “take promotional messaging and activation and get them behind the consumer firewall. In order to do that they need to be blended with content, conventional media and brand.”